MEDI-CAL: Government Crackdown Reveals $40M in Fraud
A joint federal and state crackdown initiated by Gov. Gray Davis has uncovered cases of Medi-Cal fraud worth more than $40 million. The July task force focused on Medi-Cal operations, which account for less than $1 billion in expenditures of the $20 billion annual budget, the L.A. Times reports. Medi-Cal operations involves independent laboratories and equipment companies and non-chain pharmacies that provide supplies and services to low- income patients not participating in managed care. Investigators accused contractors of submitting false billings for medical devices, phony lab tests and prescriptions never delivered to recipients. Already, 38 business owners -- all in the Los Angeles area -- have been charged with fraud, 23 of whom have been convicted and sentenced to a minimum of one year incarceration and payment of restitutions. An additional 150 businesses are currently under investigation. Concurrent state audits by Controller Kathleen Connell's office have uncovered another $17 million in suspected fraud.
New Scam-Busting Approach
The Medi-Cal probe represents a "dramatic shift of emphasis" in fraud investigations. Providers, not recipients are now the primary target. State officials stated that provider fraud "drains hundreds of millions of dollars more from the system" than does patient fraud. Stan Rosenstein, assistant deputy director for medical care services for the state health department said, "Our approach has very definitely changed. It is much more aggressive." Officials sophisticated crime organizations for a variety of scams. The latest trend is the "vanishing providers" which involves establishing a "straw company" -- with no inventory or assets -- that charges the state for Medi-Cal supplies. Most fraudulent operators purchase patient Medi-Cal numbers on the black market in exchange for "gifts," including clothing and appliances. A "more serious" scam involves laboratories that offer teenagers up to $30 for a blood sample to be used for phony tests. The blood is "often drawn by nonprofessionals with contaminated needles," the Times notes. Health officials hope to discourage fraud by establishing a hotline for patients to report suspected illegal activity and suspicious billing patterns. Also, Medi-Cal acceptance of new suppliers has been temporarily suspended; the 4,500 current contractors have been notified that they must re-enroll in the Medi-Cal program and sign an agreement that allows greater disclosure of their business activities. State Department of Health Services director Diana Bonta said, "Some of these scams really hurt people, that's the hard part. And any time you have fraud, it takes money away from clients who need it." The Medi-Cal fraud hotline number is 800-822-6222 (Ellis, Los Angles Times, 11/3).